Gold Slides as Hawkish Fed and Strong Dollar Test Bullion’s Rally

Gold fell below the $4,160 per ounce level on Friday, extending a sharp retreat as a stronger U.S. dollar and a more hawkish Federal Reserve outlook reduced the appeal of non-yielding bullion.

The move marks another setback for gold after a powerful multi-year rally. Spot prices have come under pressure since the Fed’s latest policy meeting, where officials kept the benchmark interest-rate range unchanged at 3.50% to 3.75% but shifted their projections in a more restrictive direction. Instead of the earlier market hope for rate cuts, the latest dot plot showed a median 2026 rate projection around 3.8%, with several policymakers now seeing the possibility of higher rates before year-end.

That matters for gold because bullion does not pay interest. When investors expect policy rates to stay higher for longer, or even rise, the opportunity cost of holding gold increases. At the same time, a stronger U.S. dollar makes dollar-priced commodities more expensive for international buyers, often adding pressure to gold, silver and other precious metals.

The dollar’s advance has become one of the clearest short-term headwinds. A one-year high in the greenback has strengthened the case for profit-taking in gold, especially after a period in which investors had already priced in aggressive safe-haven and central-bank demand. Friday’s decline therefore reflects more than a single Fed meeting: it shows a market reassessing whether the macro backdrop still justifies the most bullish gold forecasts.

Bank views are also beginning to diverge. Citi Research recently cut its near-term gold target to $4,000 per ounce, warning that upside may be limited in the immediate term as macro conditions become less supportive. Goldman Sachs, which had previously carried a $5,400 year-end forecast, has reportedly reduced that target to about $4,900 after removing expected 2026 Fed cuts from its base case.

Even after that downgrade, Goldman’s revised forecast still implies upside from current levels. That highlights the central tension in the gold market: short-term monetary policy is turning less friendly, but longer-term structural demand has not disappeared. Central banks remain important buyers, geopolitical risks continue to support safe-haven demand, and concerns about fiscal deficits remain part of the bullish argument.

For now, however, traders appear focused on rates and the dollar. If upcoming U.S. inflation data reinforce the Fed’s cautious stance, gold could retest the $4,000 area that Citi now sees as a more realistic near-term target. A softer inflation print or a reversal in the dollar would likely be needed to revive momentum toward the higher year-end forecasts.

The key takeaway is that gold’s long-term story remains intact, but the short-term trade has become more difficult. The market is no longer simply debating how quickly the Fed will cut. It is now pricing the possibility that the next move could be a hike, and that shift has changed the risk-reward balance for bullion.